Earnings call transcript: Enovix beats Q2 2025 revenue forecast, stock rises

Enovix Corp reported its financial results for Q2 2025, showing a significant revenue beat and a narrower-than-expected loss per share. The company posted a revenue of $7.5 million, far exceeding the forecasted $5.57 million, and an EPS of -$0.13, better than the anticipated -$0.19. Following these results, Enovix shares experienced a 1.63% increase in premarket trading, reflecting investor optimism. InvestingPro data shows the company has maintained impressive revenue growth of 77.59% over the last twelve months, with analysts anticipating continued sales growth this year.

Key Takeaways

• Enovix’s Q2 revenue grew by 98% year-over-year, surpassing expectations.
• The company’s EPS loss was narrower than analysts predicted.
• Gross margin improved to 31%, driven by a favorable product mix.
• A $60 million share buyback program was authorized.
• Enovix launched its A1 battery platform, enhancing its competitive position.

Company Performance

Enovix demonstrated strong performance this quarter, with significant revenue growth and improved margins. The company’s strategic focus on innovation and operational efficiency continues to drive results. The launch of the A1 battery platform positions Enovix well within the evolving smartphone and AR/VR markets, which are increasingly demanding higher energy density solutions.

Financial Highlights

• Revenue: $7.5 million, a 98% increase year-over-year.
• Earnings per share: -$0.13, compared to the forecasted -$0.19.
• Gross margin: 31%, supported by a favorable defense product mix.
• Operating expenses: $28.8 million, down 5% from the previous year.

Earnings vs. Forecast

Enovix’s Q2 results surpassed expectations with a revenue surprise of 34.65% and an EPS surprise of 31.58%. This marks a positive deviation from the forecasted figures, indicating effective cost management and strong market demand for its new battery technologies.

Market Reaction

Following the earnings announcement, Enovix’s stock rose by 1.63% in premarket trading. The stock’s movement reflects investor confidence in the company’s growth trajectory and strategic initiatives. With a beta of 2.08, InvestingPro analysis indicates the stock exhibits higher volatility than the market. According to InvestingPro’s Fair Value model, Enovix appears slightly undervalued at current levels, suggesting potential upside. The company maintains strong liquidity with a current ratio of 4.68, though profitability remains a challenge with negative gross margins.

Outlook & Guidance

Looking ahead, Enovix anticipates sequential revenue growth in Q3 2025, although it expects a slight increase in net operating loss. The company continues to focus on customer qualification processes and is preparing for potential smartphone battery production by late 2024. InvestingPro subscribers can access 12 additional key insights about Enovix, including detailed analysis of its financial health, growth prospects, and market position. The comprehensive Pro Research Report available for Enovix is part of the platform’s coverage of over 1,400 US stocks, providing institutional-grade analysis for informed investment decisions.

Executive Commentary

CEO Raj Taluri emphasized the critical role of batteries in device performance, stating, "The battery is the bottleneck and it is becoming even more of a bottleneck for people to really realize the full power of the devices they buy." He also highlighted the company’s market potential, noting, "This is a huge market. We’re talking about 100,000,000 units plus market and we’re talking about selling a few million batteries."

Risks and Challenges

• Supply chain constraints could impact production timelines.
• Market competition in the battery sector remains intense.
• Economic downturns may affect consumer spending on new technologies.
• Regulatory changes could pose compliance challenges.
• Technological advancements by competitors may threaten market share.

Q&A

During the earnings call, analysts inquired about the customer qualification processes and the timeline for battery sampling and testing. Enovix provided insights into its manufacturing ramp-up strategy and discussed market opportunities in the smartphone and AR/VR sectors, emphasizing the importance of pricing dynamics for high-energy-density batteries.

Full transcript - Enovix Corp (ENVX) Q2 2025:

Raj Taluri, CEO, Enovix: Thank you, Rob, and thank you all for joining us for this presentation. And thank you, TJ, for joining us today. Fellow shareholders, the company made great progress in Q2 on all fronts. We launched our A1 product platform. We hit key milestones with many of our strategic customers.

We launched a warrant dividend to simultaneously reward our shareholders and also fund our future growth. Fab two in Malaysia had made the first A1 batteries now of our high volume manufacturing line. Now with our product sampling to two major smartphone OEMs and a leading eyewear company and strategic IoT customers, we are truly now moving into commercialization phase of our journey. Now, in terms of highlights for the quarter, there’s a few highlights and I’m going to walk you through some of them using the shareholder letter in the backdrop here. I’ll point you to the things I’m talking about.

Revenue, we delivered Q2 revenue of $7,500,000 above the guidance range and it’s up 98 year on year. And this was driven by strong demand for our products and non GAAP gross margin reached 31% reflecting the higher margin of the defense products that we get from our Korean factory. And we launched the A1 platform. The A1 platform is a leadership platform with the core battery architecture. It has some advanced materials, microenvironment design rules and it meets all the requirements of the smartphone market.

And it is, in our opinion, the highest watt hours per liter, 900 watt hours per liter battery with 3C charge rate and now we feel it goes up to 1,000 cycles. This is the first platform that has 100% active silicon anode and it’s in commercial qualification with our customers now. And again, we have over 400 patents on top of this technology that we have built. Doing this high energy density with long cycle life and fast charging is really the key value of this platform and our customers have a lot of interest from our customers to qualify this product. In a small battery like this, we have 26.3 watt hours per liter and I’m going to have T.

J. Talk a little bit about what that number means.

TJ Rodgers, Board Member, Enovix: Thank you. I decided to in a prior press release, which I asked them to put in here, do a little geek work on this thing. The battery is 1.8 cubic inches. Then you asked, well, how much energy is 26.3 watt hours in that little package? Well, the answer is if you do a calculation, it’s enough to lift a 5,000 pound truck.

This is a working height of 4.7 feet. Three times in that little battery. And we’re actually working right now on a demonstration to do that for real except I’m going to use a Lamborghini instead of a truck. Thank you DJ.

Raj Taluri, CEO, Enovix: So a couple of other highlights I want to talk about. Here, we’ve now sampled this battery to our lead smartphone OEM and they’re doing all the different tests that they do to make sure this battery is working well in the phone that they want to launch in. And this testing takes time. Thousand cycles takes multiple months to test because when they put a new supply battery in, they go through the full cycle life test and we started sampling them in July, so in three months. Course we have weekly meetings with them to see how the tests are going and we expect the test to be completed in three months’ time.

If everything goes well, we should be getting orders from them to get this to mass production. We’ve also made a lot of progress in smart eyewear. The AI1 battery in smart eyewear is also a tremendous value because in smart eyewear what happens is there is not much space to put a big battery. So typically as you can see here, the battery is really small. It fits in these legs here and sometimes people put two batteries, one on each side.

One of the key things about these smart glasses is AI is having a huge impact on the usability of these glasses because now you can talk to these ones and most of them have cameras that look at the world so they’re able to detect what’s going on in the real world and then use that information to change how the glasses experience is. So which means you need tremendous amount of energy density in a small package to actually do that and it’s a real advantage for us. And we have sampled this to multiple AR customers and the amount of samples we did also increased this year. And the other important thing to remember is that I believe that the AR use cases will only continue to grow in this market. And as these use cases grow, the process have to run faster, the memories have to run faster, there’s a lot more data that has to be computed.

There will be more sensors there which means we need a roadmap of product technology here where we continue to increase energy density in the small size. And you can see here on the right side, we have a roadmap of different technologies that will continue to increase that. Now a few other things. One thing I find about these markets like AR when they first start is that it’s very important to be the battery of choice for the ecosystem. And what I mean by ecosystem?

Ecosystem is people who make processors, people who make the waveguide optics, people who make different sensors. And we are now working with the people who actually make this process. We’ve sampled these batteries to them to make sure that the batteries have the performance they need in the various use cases because in these markets the use case is a little bit different than smartphones. The discharge rate is a little bit different and so on. So it’s very important to have a battery that supports the ecosystem and VB in reference designs than any number of customers that can actually take the reference design and the InnoVix battery has a potential of becoming the standard for that.

So we’re making a lot of progress on that this quarter. The other thing I’ve said before is that when you make a battery that can meet the requirements of the smartphone market, high energy density, long cycle life and fast charge, that is the toughest battery to make. That battery can then be used in many other markets and we are seeing that now with the IoT markets. Recently we’ve had a customer, one of the leading customers in industrial handheld markets sign an agreement with us so that they can actually get these batteries and test them in the next generation of the products they want to launch. Now I also mentioned that with the recent in the last call with the recent tariff situation, people really want in defense markets, people really want batteries made from countries with more advantageous tariff situation.

And we have this Korean asset that we acquired and we added to that a lot more capacity last time with the acquisition we made from SolarEdge. That is now helping us grow this market into some of the other US defense companies and we started sampling to multiple customers now. Now our factory in Penang is really coming up together well. And in Q2, we accelerated our customer qualification efforts. Multiple customers have come now and visited our factory.

And as I mentioned, in this space of making lithium ion batteries, making custom battery is very important. We have now reduced the time it takes to make a custom battery down by 50% from before. Because as I mentioned before, our factory, our machines are able to bake batteries batteries of different sizes, but we have to reconfigure them and we’re able to do it much faster now. But the factory in this AI one smartphone battery has also now passed the UN 8.3 certification, which is very important for airline safety certification for our first battery and now we are able to ship these to our customers. And as we build confidence in the customers we are sampling and the qualification that’s going on, we now started placing initial purchase orders for adding more capacity to the factory and building some of the long lead time items for the second HVM line.

We were also able to do that in the last quarter. What I actually want to do now is I know we put a little teaser of a video before. I actually want to show you a video we just recently did of the entire factory producing the AI one smartphone batteries that we are sampling to customers. So let’s play the video.

Video Narrator: We know this was built for one reason, to manufacture the world’s highest energy density batteries at scale. At our core is a breakthrough in design. Three d stacked architecture. Tighter, stronger, more reliable under stress. A structural leap that redefines how a modern battery factory must operate.

The result: a 100% active silicon anode battery that marks a generational advancement in energy density. We start with laser cut electrodes and micron level precision. Each cut drives consistency. Cells are stacked under pressure, locked in place with constraint plates and joined by a busbar threading seven millimeters tolerances, automated at speed. Every unit is tracked in real time.

State of the art machine vision, x-ray inspection, quality and reliability. If it leaves our factory, it’s passed every extensive test we built into the line. Even the smallest steps have been reinvented. Like our proprietary flag bonding process, where copper meets lithium. Designed in house to stretch the lifespan and raise performance beyond what legacy systems can reach.

Fully automated and built to produce millions of cells with exceptional precision. Highest battery capacity per unit volume from one of the most abundant elements on earth: silicon. No trade offs, no shortcuts. This is what it means to scale a breakthrough. This is Enovix.

Raj Taluri, CEO, Enovix: Awesome. So I hope you guys got to see that video and we are super excited by that factory and really that’s what a state of the art battery factory needs to look like and you can see the cells being produced there. Now, in July, we also issued a special shareholder award and dividend, rewarding all our shareholders and giving us an opportunity to raise additional capital because we want to build out the rest of that factory that I show in that video. Now the asset we acquired in Korea to increase our defense capabilities, defense battery capabilities also came with additional coating equipment and it’s a really important asset that we acquired because this newly acquired coating equipment is going to help us ramp the batteries in Fab two as we start building out the factory and as we start getting higher and higher volume into production. Now I want to say a little bit about coating.

Coating is a very important part of battery making. In coating what we do is we take this giant copper and aluminum rolls and I see here like 105 millimeter wide and 500 millimeter long rolls of copper and aluminum foil and we get this latest anode powders and cathode powders that keep changing in the market as people make more advances and we coat them on top of these rolls. Now it’s very important to be able to coat these to the precision we need, for the density we need and so on because the way we make the batteries, the way we dice the rolls and put them together is very different from people who just make jelly roll batteries. It’s important that we control the coating. So this ability that we acquired is really helping us and it’s helping us in many ways.

It’s helping us reduce cost, it’s helping us increase the battery performance, it’s also helping us prototype new materials really, really fast. It used to take us twenty weeks to prototype a new material. Now we can do it under seven because we own our own coating. And this is the power of being vertically integrated in this battery manufacturing. This is in the investor letter.

I’m not going to go through all of that but I just want to say something which I mentioned when I first joined the company. The battery is the bottleneck and it is becoming even more of a bottleneck for people to really realize the full power of the devices they buy. And this has become even more and more evident now as AI and AI applications have become even more prevalent in the phones and in other consumer electronic devices. Now recently and I show a little anecdotal evidence here, we saw a smartphone AM launch like a mid tier and maybe even a little bit lower tier phone which is a $100 $200.203 $100 phone have like an 8,000 milliampere battery. Why is that important?

And that used to be like $6,600 Of course, they made the battery bigger to get that. That’s important because the bill of materials in a smartphone, in a 1,000 smartphone, the battery is becoming bigger and bigger percentage of that and the space is not getting any bigger. So energy density is at a premium and for us having able to produce the AI1 battery with a strong roadmap to even higher energy density, these are nice tailwinds for us to get higher ASP over time and access a much larger market.

TJ Rodgers, Board Member, Enovix: Can I make a point? Yeah, please. One quick point on the batteries bottleneck that makes it, I think, obvious. A typical AI chip is bigger than PC chips used to be, and it contains, today, a 100,000,000,000 transistors. So you’re looking at a chip that’s the size of a commemorative postage stamp with a 100,000,000,000 transistors on it.

And that sucker, even though it draws nanoamperes or nanowatts on node by node basis, draws amperes of current. And that is the state of the art chip that’s already made. They’re they’re making now down at three three nanometers to get it done. So to do AI requires a lot of power because you’re using giant chips with a lot of transistors, and that’s unavoidable right

Mark Schuster, Analyst, William Blair: now.

Raj Taluri, CEO, Enovix: Yeah. Thank you, DJ. Okay. I’m going to turn it over to Ryan now to to talk about the financials.

Ryan, CFO, Enovix: Thanks, Raj. Thanks, DJ. First, a quick housekeeping point. On July 7, we issued preliminary results. The final print, you’ll see here, which includes a few positive adjustments.

So, first, we’ll talk about the Q2 results. So, revenue, dollars 7,500,000.0, well above our guidance range of 4.5 to 6.5. As Raj mentioned, up 98% year over year. Fifth straight quarter that we’ve beat the midpoint of the guidance that we’ve provided. Nice result.

Also, result in terms of gross profit and gross margin. As you can see, gross margin year over year turned positive 31%. Really strong quarter, basically on the back of great product mix with the defense sector. As we move to operating expenses, can see as well, 28,800,000.0 for the quarter, down 5% year over year. The company maintained discipline in terms of spend, even while it’s continued to execute on meeting the mission of building out Fab two, and continuing with our R and D efforts.

Loss in operations, you can see there, is a result of that. So, an improvement year over year. Let’s go to the next slide. Couple points here as well. So, in terms of the net loss per share, on a quarterly basis, zero three, again also improved from our guidance, a range of 15 to 21%.

And a couple of points on cash. We finished Q2 with $203,400,000 and that included after making payments, completing the acquisition, and additional capital expenditures related to FAB two. Another point that we have here on the bottom is that the board authorized, which we previously announced, a $60,000,000 share buyback program. As of today, we have not made any purchases under the program, but we stand by at the ready, especially in the face of market volatility. And finally, here you see our promises for Q3, in terms of the outlook.

Revenue on a top line basis, we do see growing sequentially, and well above where we were last year. Net operating loss, we see increasing slightly. Really two things, less favorable product mix we see in Q3, and increased operating expenses related to the manufacturing readiness scale up. And you see the net loss per share, we see a range of 14 to 18¢, compared to the 13¢ in q two. And the midpoint of that range, right on par with the 16¢ that we posted last year.

Raj Taluri, CEO, Enovix: Okay. Awesome. Thank you. And can I go for a q and a?

Moderator: We will now begin the q and a session. Please note that this call is being recorded. Before we go to live questions, we are going to read the two most highly voted questions submitted by shareholders ahead of this call during the call registration. The first question is, when will Enovix batteries appear in products?

Raj Taluri, CEO, Enovix: Yeah. Thank you for that question. I think as I mentioned, are we are sampling our AI one battery now to multiple customers. And particularly in the smartphone space is where we expect our first products to launch using our battery. And they’re in cycling, they’re in doing different tests.

Like I said that takes about at least three months for them to do all the tests and after that once we pass all those tests we expect to get a purchase order from them and expect the phones to launch. So it’s now in the hands of our customers and we expect them to come out as soon as the test and all qualification is done by them.

Moderator: The second question is, can you explain the need for the warrants? What will the money be used for? Is it for the new lines or a new facility? How many lines can you fit in your facility?

Raj Taluri, CEO, Enovix: I’ll take that, Ryan. Yeah.

Ryan, CFO, Enovix: No. The the proceeds from the warrants, if if exercised, will be used to complete the build out of Fab 2. So we have one high volume line that’s that’s operational now, and the facility is sized to support four full lines. Of course, the funds will be used for general working capital purposes, so supporting our strategic initiatives, such as continued R and D development. And I can report in terms of little progress on the warrants.

Again, we’re pleased with the result. As of yesterday, we had roughly $34,000,000 worth of exercises, I believe was the data that I’ve seen. So money that essentially has come into the company soon. We

Moderator: will now go to the queue. If you would like to ask a question, please use the raise hand feature on your screen. If you have dialed in via phone, please use 9 to raise your hand and 6 to unmute yourself. Questions will be answered in the order they are received. Please ask one question and one follow-up question at most.

We will now pause a moment to assemble the queue. Our first question comes from Colin Rusch with Oppenheimer. Please unmute your line and ask your question.

Colin Rusch, Analyst, Oppenheimer: Thanks so much, guys, and congrats on all the progress. You know, can you talk a little bit about where you’re at with the customers in terms of, you know, specs getting finalized for some of these some of these new products? I know you’ve talked about the one customer, getting launched here later this year, but I assume that you’re making some meaningful progress with other folks as well. And when we can start seeing some of those incremental, announcements and, you know, product finalizations, or product specs getting finalized, you know, over the next several quarters?

Raj Taluri, CEO, Enovix: Yeah. Thank you, Colin. So specs wise, the the first customer we’ve had the specs, and that’s the specs to which we made the battery, and and we sent them the cells, and they’re testing them now. They’re actually doing cycle life test, which like I said is charge discharge at various times. Like we saw in the, as I mentioned in the call, our batteries now we feel are projecting now that it can go up to 1,000 cycles and last time when we announced AI1, we thought it could be like up to 800 and now we’ve progressed further along now and so we feel good about our technology and our customers are testing that.

We’ve just shipped samples out of our factory to the second customer now, second smartphone OEM. Those will again I’ve been holding them back a little bit because I wanted to make sure that we satisfied all the requirements of the first one before we send to the second one. And we send them now and we got the specs from them on exactly what cycle life, what performance trade offs that they want and we feel our current technology can meet those. My expectation is that they will test these batteries and then they will give us the exact dimensions just like how the first customer did on the size of the battery that they want for the launch next year because next year phones will have a slightly different battery based on the display they chose, based on the camera they chose and so on. And once we get that we will make batteries to that and we expect that to go to production sometime later part of next year.

Then of course we’re getting a lot of interest from more customers and we will start sampling them through the year. TJ, do want to make a comment?

TJ Rodgers, Board Member, Enovix: Colin, I’d like to make a comment from a board perspective. So I come here for a full day board meeting once a quarter. I also come here for three other six ish hour meetings, including manufacturing and R and D. And to me, the process by which you get the spec is more important at my level than the spec itself. Do you have a thousand cycles?

Is the new spec bigger? That’s the sausage making. But what we failed at, I failed at, in the old pre Raj Inovix was we had a set of specs, and we went out and made them like engineers. And I’ll give you an example. There’s a video of me on the website where I’m poking a nail through a battery, and it’s really true.

Our battery doesn’t light up and turn on fire when you poke a stainless steel nail through it. And it’s really true in our relab. We have a nail poker machine that’s got fireproof chamber in it. It’s also really true. Cell phone guys don’t care.

And we were working on something that was kind of an engineering abstraction for real when when our customers were doing things different. So when Raj came here, he’s went to customers that loved him, literally. I was shocked. They they he would send back pictures of boardrooms in Asia with 20 smiling people waving at the camera. There were and Raj’s big in the middle grinning.

So he got their spec, and their spec wasn’t what I the kind of spec I’m talking about. It was a book. And these guys are world class users of batteries. And then they sent us some people, and they said, no. You gotta do this.

No. You gotta do that. This spec is interpreted this way. And they actually, did some of the work to validate our our spec. I’ll just back in my example, the the state of the art way to set a battery on fire and make sure it doesn’t get on fire is you crush it.

You actually crush it down and and grind it together to start mixing the things inside the battery, and that’s a a more deadly way of starting a fire than poking a nail through it. And we now do that test. We just finished that test last week in the a one battery. So point of all this is rise as a world class guy working with customers, and the semiconductor industry was different. If you got Moore’s Law and you’ve got the fastest memory with the most bits and you can meet their price, you win.

And in this case, these things are pretty complicated systems, and we’re building to their specs, working with their engineers. So my apprehension that if you build it, will they buy it is way lower. They’re they’re they’re gonna buy it, and we’re gonna build it the way they want it. And I’m talking books worth of data on what they want. That that’s the difference in the old and new Anovics, pre rise, post rise.

Colin Rusch, Analyst, Oppenheimer: That’s incredibly helpful. Appreciate that, TJ. You know, just thinking about capital equipment and the potential for expansion here, can you talk about, you know, preparedness of your your capital equipment suppliers to support an expansion, you know, and any sort of tweaks that you’re thinking about on the on the line now that you’ve been able to do a fair amount of work on on testing each of the systems?

Raj Taluri, CEO, Enovix: Yeah. So, you know, I think I I I have mentioned that a couple of weeks ago, was in Asia and I visited some of our equipment suppliers. This time around, we’re actually, as I said, I mean, compared to what we used to build in Fremont to what we’re building in Malaysia, the equipment suppliers now that we are using are actually people who are used to making very complex semiconductor equipment. This is people, I I saw a supplier, they kind of figured out how to put really thin copper pins into the die at like submicron precision. I mean, it’s crazy.

These are the people we’re using and there’s some very exciting new technology there and I visited a few of them. And we have some new interesting ways to actually continue to dice the electrodes and make them even faster. So we started some proof of concept systems and I saw some of the systems being built. That’s what I meant when I said we are now making some initial purchase orders towards that. So yeah, I think we are telling them that what we need and some of the suppliers have actually visited our factory in Penang and they know where these machines are going to be put in.

So in terms of readiness, yes, absolutely. Starting the work now and very exciting to see the latest advances in semiconductor manufacturing that we are now able to use to make batteries. I think that’s the key that you’ll see because we make submicron like micron precision cutting and stacking. So the equipment we use is very precise and this is what is being done in the semiconductor industry and we’re using the same suppliers.

Colin Rusch, Analyst, Oppenheimer: Our

Moderator: next question comes from Jeff Osborne with TD Securities. Please unmute your line and ask your question.

Jeff Osborne, Analyst, TD Securities: Yeah. Thank you. Yeah. Just two questions on my side. If you were to to win the the two phone engagements as well as the eyewear, and it sounds like those would launch three, four months after the the sampling started last or this month, How do we think about the the need for sort of working capital growth?

Are you already, you know, operating as if you’re going to win? What are the lead times for the materials that you need to to buy to to ramp up line one and fab two?

Ryan, CFO, Enovix: Maybe I’ll jump in there. Yeah. I mean, I think I’ll answer the last part first. We’re certainly operating to win. That’s our how we’re operating.

We obviously, the balance sheet, we finished the quarter with over $2,000,000 at end of Q2. And so we’re sufficiently capitalized, and we’re preparing for the manufacturing ramp.

Jeff Osborne, Analyst, TD Securities: Good to hear. And then just maybe another question on the balance sheet side, just given the warrant structure was a bit creative and not you know, familiar with most investors. I’ve had several people ask just in the event that, you know, only a portion of the warrant were to be exercised. Is there sort of a minimum level that would avoid the need for a a future capital raise? I you think mentioned 34,000,000 as of yesterday was done.

You know, as you look at the the ramp into the middle of next year, if you were to win these engagements and maybe more, how how do you, you know, contemplate building out the fab two completely? Is it is half the warrant enough to do that, or maybe just walk us through that?

Ryan, CFO, Enovix: Yeah. I’ll I’ll I’ll step in there as well. I I don’t think half the warrant would be sufficient capital to completely build out all four lines we’ve talked about, and we provided publicly our estimate of how much those lines cost, which is 50,000,000 to $60,000,000 But certainly, even adding one additional line, which, again, we’re our balance sheet is strong as it is right now, and the $34,000,000 helps, that’s going to get us to substantial capacity. Two lines running that factory, we talked about nameplate capacity of nine to 10,000,000 units per year. So that’s going to go a long way to helping the company meet important milestones.

Jeff Osborne, Analyst, TD Securities: Our

Moderator: next question comes from Mark Schuster from William Blair. Please unmute your line and ask your question.

Mark Schuster, Analyst, William Blair: Hi, team. I was hoping that as you guys get close to commercialization, we could revisit some of the numbers that we were talking about regards for ASPs. We’ve seen that batteries have increased so much since you guys have first started talking about pursuing the smartphone market in terms of milliamp hours. So what are you seeing now in the market for ASPs as we approach 10,000 milliamp hours? And and how do you see the AI one being able to get pricing power against the incumbents?

Raj Taluri, CEO, Enovix: Yeah. I mean, great great question, Mark. I I you know, as I mentioned, right, I mean, if if two years ago if we said, three years ago, or even last year, we said, hey, the next smartphone battery is gonna have a 10,000 milliampere battery, I don’t think most people would have believed. But today, that’s true. And the other interesting thing is it’s not that the battery is getting that big, it’s the battery is getting that big across the tiers.

And this is something I saw when I was at Qualcomm and we started launching smartphone process and we said we’re gonna use a high megapixel camera, like a 50 megapixel, 60 megapixel in the premium tier smartphone. And everyone said, okay, premium tier will have a high megapixel. I mean, today, dollars 200 phone has like over fifty, sixty, 70, even a 100 megapixels. So the cameras have just kind of and we talked about multiple cameras being on the very high end. Now multiple cameras are across the board.

I see the same thing happening on batteries now. What used to be a premium tier battery which is 6,000 milliamp hours, we’re now seeing that in the $200 phones and probably go down even more and then we see even higher capacity batteries at the top. And that clearly just like it happened with DRAMs, it’s dollars per amp hours. So the ASPs will continue to move up and we probably have to redo our models now. And also redo the factory loading because bigger batteries take more capacity to make.

This is a great thing to have, great situation and I actually think that the ASP will continue to go up and the premium we get for producing a higher capacity battery in the same space, which is really the key because you can’t just keep making phones bigger which means you need higher energy density. And Not only higher energy density but have that higher energy density with fast charge, with thousand cycles and high temperature storage. We benchmark a lot of batteries out there and the AI1 is the only battery I know of that can meet all those requirements right now and we have a strong roadmap for making that go higher. To your point, we do think that ASPs will go up and we do think that the premium we can command will go up with AI one as we start making this higher energy density reality in these phones.

Mark Schuster, Analyst, William Blair: Great. Thanks for the color, Raj. The next market that you guys are excited about is the the AR, VR, and the the smart glass market. So in the last quarter, we’ve seen a few more products come to market or at least start to ramp. And I’m wondering if there’s any increased engagement going on there.

I know you mentioned in the shareholder letter with the the sampling, but can you go over a little bit more color of why you can command more ASP or more gross margin in those products and why the watt hours per liter is so crucial for the AR, VR smart glasses opportunity?

Raj Taluri, CEO, Enovix: Yeah. So so good question. So two things. First, you know, people have always tried to make another smart device outside smartphone. People have tried for a long time.

People tried watches, people tried pins, people tried so many things. But none of them really, the watches took off a little bit, but none of them really took off to a point where you don’t have to pull out your smartphone to do something and you can use this new device. Glasses are the first ones that have the potential to do that because a huge percentage of the population including people like me wear glasses. So if you can get more functionality into something you already wear, it’s a huge benefit. The other thing is the glasses have cameras that can look into the world.

So now with Gen AI, when you look into the world, when you see what’s out there and with the ability to also have microphones, you can just do a lot more. The microdisplays, we haven’t really seen glasses in high volume production right now that have very good augmentation. The glasses today still right now that are in high volume mostly have cameras and audio and some form of speech recognition but they’re not really AR. They’re not creating that AR experience. And when you create that AR experience, what happens is you have a display inside your glasses that people can’t see but you can see.

We’ve seen demos of those at CES and other markets but we are now seeing that the customers we are sampling to are building things like that. And when you do that, here is what happens. The processor has to be on and more importantly the GPU has to be on to create that image on that augmented display. That consumes a lot of battery and the memory has to be on. That consumes a lot more battery.

So the amount of energy density you need with true augmented reality glasses where there is a secondary display that you see inside your eyes is much, much more and that’s where we are seeing a lot of traction for our batteries is the next generation of those and that’s kind of where I believe that the energy density is so important in a small form factor.

TJ Rodgers, Board Member, Enovix: Okay, please. Okay, let me at the risk of blowing this thing up, I would engine what else an engineering point to make? So this is, in the Novix picture of a smart bet of a smart of smart glasses, and all the systems he was talking about are there. Now if you look at the side of the glasses on the left, you can see the small battery compartment. And then if you look over here, you can see a small battery.

And then this is a picture of our battery. And so it’s kind of a long, skinny, weird shape. So one thing, the way we make batteries, by laser cutting anode and cathode and and separator and stacking them. You you can make that thing right away. Second thing is think about a small battery like that one shown, and that skin that’s on there is is three layers thick.

And it prevents the electrolyte, which is a flammable liquid, from getting out. It’s a tough, metallized, three layers thick. So when you have that skin, think about making it smaller so the skin gets smaller and smaller. And if you go through it, the skin gets more and more of the volume of the battery. And at some point, when that battery still is about that big, but it’s really super thin, that there’s nothing left inside.

None of the anode cathode stuff that makes a battery. So all I’m saying is all batteries, as they get smaller, because of the overhead of connecting to them, get lower in energy density. Like, these numbers are lower than the cell phone at 900 because of that effect. Point is this. That battery we can jam a lot of watt hours per liter into that battery because we have compression.

The material in that battery is compressed, and there’s a lot more of it in a given volume because we have a compression system, a patented compression system, which happens to be made out of steel leading to point two. Point two is it’s got metal on it, which means the heat coming out of that battery come comes out across the entire wide face, enovics face of that battery, and radiates into the air. And if you try to make a battery, just stacking battery junk inside of a bag, that that thing is a bag. You just stuck stacking stuff inside of a bag. You generate a bunch of heat.

The lithium ion batteries can get hot and work fine, except you don’t exactly want something that’s, you know, 50 degrees Fahrenheit up against your temple. So the batteries are kind of naturally aligned to make high quality batteries and safe batteries as well for this this application. This always, actually was a better application. That’s why we tried for watches. This always was a better application for our technology where it’s a sweet spot, if you will, for our technology.

Moderator: Our next question comes from Ananda Baruah from Loop Capital. Please unmute your line and ask your question.

Ananda Baruah, Analyst, Loop Capital: Yeah. Thanks, guys. Good afternoon. Thanks for taking the question. Two, if I could.

Raj, can you can you remind us how we should think about when you’ll when when when the volumes that you guys will get visibility to, how that whole dynamic starts to layer in as you go through, you know, sort of finalization of the qualification with the first smartphone OEM, you know, and then you start to go in with the second smartphone OEM. Just walk us back through how how you guys are anticipating getting visibility to to production volumes, and they have a quick follow-up as well. Thanks.

Raj Taluri, CEO, Enovix: Yeah. Absolutely. I mean, I I think this is an important question, I get it on every earnings call. Basically, the way the battery industry works is a little bit different from semiconductor industry. We first sampled standard sized batteries and like, you know, rectangular batteries that we believe is the right size, not exact size but right size in terms of capacity and the customers test them and they give us a series of tests that they would like to do and we do those and we do that in our factory to make sure that it passes everything and we give it to them.

And they test it for a few months typically then they give us the exact dimensions of the battery. One customer has given it to us right and then we make the battery to that dimension, then they’re gonna take it, put it into their phone and then they’re gonna do the cycle life test. As I mentioned, thousand cycles and that takes months to test and that’s what they do. And then as T. J.

Mentioned, there’s a lot of tests like crush test, drop test and so on that they do and that takes some time. And then what they do is typically a particular model of a phone has multiple SKUs that they launch in different parts of the world. Some launch in India, some launch in Europe, some launch in US and so on. And then they take a new supplier like us and put us in one SKU and start with that and make sure that they feel comfortable introducing new technology. Then very quickly it’s going to the second SKU and the third SKU in that model.

Then once we are qualified and we are a valid supplier, very quickly it moves into multiple models. And again, this is not that different with any other supplier. Know that Micron, same thing. We produce the UFS chips, got into one SKU, then two SKUs, multiple SKUs before you know it. Finally, sometime later we’re shipping millions.

And that’s exactly what I expect should happen in this case. So we are in the middle of that with one customer. Now we’ve gotten a lot of interest after we launched the AI One platform launch because now we have the technology. By the way, I don’t think people quite realize, I think T. J.

Wrote in the AI1 press release, the amount of complex R and D work we had to do to take 100% active silicon anode, put it under pressure, put it under the temperature stress and for the first time, get a 900 watt hours per liter with three c fast charge and thousand cycles and storage at high temperatures and work across temperature range. Has never been done before with 100% active silicon. So as soon as we launched that, I got a lot of requests from many customers. And in a couple of weeks, I’m gonna be back in Asia. And we will sample this to other customers and the same process will happen.

They will test this battery, they’ll then give us the exact dimensions that they need. Then we’re we’re gonna test them internally. Sure. We’re gonna put them in the phone, and then we expect the production to happen next year. That that’s the same process.

And and the second time around, it’ll be much faster because we are a valid supplier now. We’re not the first time supplier. But the first one takes some time.

Ananda Baruah, Analyst, Loop Capital: And okay. Let me and can I ask you this, TJ? I mean, not well, TJ, if you’d like to jump in also, really, really, Amit Raj. But but any context would be good. To the extent that you’re you can, like, responsibly answer this question.

So if let like, let’s say the first call happens, you kinda wrap it up in, like, three or four months, and then you get an inclusion into the first SKU. And then so let’s say that’s, you know, kinda going through the fall and then maybe going into next year, you get on like, what you said, Raj, like, the second skew and the third skew going into next year. Is it is it and let me know if this is off base. Is it reasonable that to think that, like, going into spring, you could be, what you call, I think you said, like, a sort of, like, a a a valid supplier. You know?

Like and then you could go across more SKUs. Is that is that reasonable? Is that the right way to think about the timing As distinct from the the volumes that you get with that.

Raj Taluri, CEO, Enovix: Yeah. It’s the right way to think about And and like I said, I think the most important thing is, you know, this particular shape of the battery, how many SKUs does it satisfy. If we need to change the battery shape, then it’ll take us few months which I said in the prepared remarks, we’re now reducing the amount of time it takes to make different sizes. So we’ll need to make a different size if it’s a SKU that needs a different size battery. There’ll be some lead time associated with that but that’s just the way the progression continues.

But the thing you got to remember is that this is a huge market. Mean we’re talking about 100,000,000 units plus market and we’re talking about selling a few million batteries. The opportunity is clearly there. The first one is a hard one, but once we get there, it’ll start moving.

Ananda Baruah, Analyst, Loop Capital: Thank you. Appreciate it. Thanks, guys.

Moderator: Our next question comes from Tony Soss from Craig Hallum. Please unmute your line and ask your question.

Tony Soss, Analyst, Craig Hallum: Hi, guys. Nice to see you again, TJ. I wanted to follow-up on the investor letter where you talked about you’ve passed the airline safety certification. How important was that? And is there any additional hurdles that you need before you can start shipping in volume to that first smartphone customer?

And then I had a follow-up.

Raj Taluri, CEO, Enovix: Yes. So the certification of 8.3 is a very important certification because without that, it’s hard to ship batteries on a plane. That’s the first thing you gotta remember. Have to take all kinds of exceptions to get batteries out there. The second one is when you make a battery for the first time in our factory of a certain shape, passing that gives us the confidence that this is an extremely safe battery and we’re able to pass that.

Now there’s other certifications we need to do on top of that and we are in the middle of that but this is a huge first step for us that we’re able to pass that on a giant new battery like we made for the first time in our factory. So it’s a very important step. Like I said, the other qualifications that the customers do are not just industry based certifications but very specific tests that they have. As T. J.

Was mentioning, we got books that big on how they would test the battery. For example, one of the tests they do is take the battery, put it in a phone and drop it from a certain height multiple times. The other one they do is they put it in a big washing machine like thing and they spin the battery for many, many times. And then they also store it at high temperature. So there are lots of different tests that they do.

And every customer is a little bit different but we do have all those tests with us and we try to do them ahead of time so that to make sure when they get samples they pass them but then they will do it again on their own. So it’s a pretty rigorous process.

Tony Soss, Analyst, Craig Hallum: Got it. Thank you. And then as a follow-up to Scott

Raj Taluri, CEO, Enovix: PJ is gonna add something to it. Go ahead.

TJ Rodgers, Board Member, Enovix: I just wanna talk about, given my background, ramping the factory. I remember when we started Cypress, we started two runs a week, two twenty five wafer runs, 50 wafers a week. And it took us a year to ramp our first fab. So this fab has got new and it’s new equipment. We learned a hard lesson with our first fab where the equipment wasn’t what I would call semiconductor quality equipment, and we were in a place that doesn’t make semiconductors anymore.

We were in Fremont, California. And we call it quote Silicon Unquote Valley, but they haven’t put a new fab here in thirty years. So you can’t hire people that work in the neighboring company and want a raise to come over to your company. So what we’ve got going for us is we’re in Penang. And Penang, Malaysia is the center, the epicenter of semiconductor assembly and test.

So when you look at semiconductors today and you see modules that big with chips integrated into them, chips stacked vertically with each other, Those are the kind of dimensions that those people live with. And we have people from the semiconductor industry in our plant. I’m really impressed with the quality of people in our plant. So we got good equipment from a good manufacturer, cost more money than I wanted, and good people. So we will ramp and we’re not ramping to our own guest specs, we’re ramping to their specs.

And they’re looking at stuff real time. You can send them stuff and say, does this pass fire test? And they’ll give you a quick read. So I don’t expect we’re going to have a catastrophic problem like we had in the Fremont fab. But ramping a fab is a big deal, and there will be a surprise or two, but when you’re really close with ultra high tolerances and good manufacturing quality habits, Those are things you can accommodate.

All I’m saying is don’t expect this is like making ice cream, and then I say if I buy five more ice cream makers, we’re just going to ramp it. We’ve got a battle. We’ll have more people in the plant than we have in the rest of the company, but we’ve got good people. So I just want to warn you, we’ve got to do that. But this little pre testing we do, when we get data from them, and they tell us about the crush test as opposed to the nail penetration test, that’s going to make the probability that we get through it much higher.

Well, not much higher. It’s going to work. Put your head down and you make it work. We’ve got this much money involved. We’re going to get there.

Tony Soss, Analyst, Craig Hallum: For the color. T. J, if I could just sneak in one more follow-up just related to the eyewear customer. Raj, a few of the eyewear, companies that are launching now, the ones that are expected to be high volume over the next several years, how difficult since they’ve secured other battery suppliers already, how difficult will it be for you to displace those folks? Do you have to wait for many generations, or could it be inch you know, in the next year or two?

How quickly before you think that turns into a real revenue for you?

Raj Taluri, CEO, Enovix: Yeah. I mean, know, look, we are sampling now. Right? I mean, we’re sampling batteries now, and they’re testing them. And I I I think if I think about the eyewear, it’s a market that I’m very familiar with, the whole ARVR space.

I used to run that group when I was at Qualcomm. That’s a market that’s just happening now and there are many, many more iterations to go before we see very high volume of that product. There’ll be different versions of it by the way. I mean, I think if you think about now, it can be sold as an electronics device, it can be sold as a fashion device, it can be sold as a medical device, it can be sold as an industrial device. So it’s in the very early stage of that.

So I believe that there’ll be many, many versions of that There’ll be products that enable lifestyle, that enable productivity, that enable utility and so on. So I believe that the heart of all of them is higher energy density because as TJ mentioned, they’re very small batteries and the demands are high. So I believe that when we produce a battery that’s got much higher energy density than anything else and much safer, it shouldn’t be that hard to convert because it’s very early stage and people love it. People we have given samples to love the batteries we give. It’s a long ways to go to get into multi million units but we’re happy with the technology and we’re happy with the position we have and the feedback we’re getting from the people we have sampled.

Moderator: Our next question comes from Derek Soderberg from Cantor Fitzgerald. Please unmute your line and ask your question.

TJ Rodgers, Board Member, Enovix0: Yeah. Hey, guys. Two questions for me. Quick ones. Raj, how much are smartphone OEMs paying for batteries for the flagship smartphones today?

And then second, on the industrial handheld opportunity, sounds like maybe an RFID scanner, label printer. Is this opportunity sort of in the millions or so of devices per year? Is that the best way to to characterize that? That’s all for me. Thanks, guys.

Raj Taluri, CEO, Enovix: Yeah. I mean, I I I how much they’re paying depends upon what the energy density is. It’s actually disproportionate. When you increase the energy density in the same volume, the premium actually goes up higher. So what I mean is if you produce a 900 watt hour per liter battery versus 700 watt hour per liter battery, you get a different price per amp hour.

I hope that makes sense. Rough numbers, I would say 1.5 to $2 is probably what people pay per amp hour. So if you got eight amp hours, that’s probably you can think about anywhere between $15 to $16 That’s probably roughly what you can think about.

Moderator: Our next question comes

Raj Taluri, CEO, Enovix: I’m sorry, let me answer the second question. The second question was

Ryan, CFO, Enovix: Yes, I’ll jump in on the IHH opportunity. That’s absolutely a customer engagement. We think that’s potential for multiple million units

Raj Taluri, CEO, Enovix: on an annual basis. Yeah, one other thing I’ll say about that market. The IHH market is, again, a market I’m quite familiar with. It uses the same process as smartphones. Is that there is also an opportunity to selling replacement batteries because that’s a market where people can launch a product, it lasts for four or five years, but people also buy batteries to replace the existing battery because they work on contract.

Think about the UPS person that comes to your house and you sign something. So there’s there’s a size of the market and then there’s a size of the replacement batteries for the market and that’s the millions of units.

Moderator: Our next question comes from Gus Richard from Northland. Please unmute yourself and ask your question.

Jeff Osborne, Analyst, TD Securities: Yes. Thanks for taking the question. I was just wondering, you know, as you get closer to volume production, you know, will you wait for a purchase order to start building inventory, or, you know, will you stage some inventory? I I know because these are each custom devices in terms of dimensions.

Ryan, CFO, Enovix: Can I jump in and take Yes? No. It’s a you know, I think some people have a little bit of misconception in terms of the sampling that we’re doing now. I mean, these are not onesie twosie units. These are pretty substantial volumes in terms of what it takes for us to produce, and to go through the qualification process with the customer.

So, we have substantial inventory that we use now in terms of what we’re doing for both that process, as well as the R and D process. And so, I think all those muscles are pretty well exercised. And we have obviously, we have a great team in terms of logistics and planning, and the operations side that’s fully in lockstep, and meets with us multiple times a week in terms of forecasting demand from all the demand sources. And so, that process is well underway. Great.

Raj Taluri, CEO, Enovix: Think you did add little bit to it. Yeah.

TJ Rodgers, Board Member, Enovix: Well, my comment on that is from a boardmoney perspective, you can’t pile up inventory. First of all, the beauty of this machine is it’s an auto line. It’s linear. If this part stops, everything in front of it stops. You can’t pile crap up in semiconductor fabs for a long time, that was a problem.

This thing will have a cycle time less than thirty days, and if our purchase orders have thirty day take or pay window, which would be a typical purchase order. In the semiconductor industry, we never could get that. We never could start a wafer and ship product in thirty days. In this industry, you’ll be able to do that, especially with the equipment that’s automated linear equipment, and especially because it’s stuff. So, no, we’re not gonna eat the inventory.

We can’t afford the inventory.

Moderator: There are no further questions at this time. With that, I’d like to turn it over to doctor Raj Taluri for closing remarks.

Raj Taluri, CEO, Enovix: Yes. Thank you all for joining us, and thank you all for your support. Really good quarter, and look forward to seeing you again next quarter. Thank you.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.